INCOME TAXES

We have elected to be taxed as a REIT under the Code. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our taxable income to our stockholders. As a REIT, we generally will not be subject to corporate level federal income tax on net income that is currently distributed to stockholders.

We have wholly-owned TRS’s which are subject to federal and state income taxes. The income generated from the TRS’s is taxed at normal corporate rates.

The provision for income taxes results in effective tax rates that differ from federal and state statutory rates. A reconciliation of the provision for income tax attributable to the TRSs' income from continuing operations computed at federal statutory rates to the income tax provision reported in the financial statements is as follows:



	Year Ended December 31,
	2016			2015			2014
	(in thousands)
Income from continuing operations before income taxes for TRSs	$	5,684		$	3,010		$	5,031

Expected federal income tax provision	$	1,933		$	1,023		$	1,711
State income taxes	21			42			172
Change in valuation allowance	(1,443		)	(302		)	(1,145		)
Other	1,135			43			(134		)
Income tax provision	$	1,646		$	806		$	604

The components of our net deferred tax asset, which are included in other assets, are as follows:



	December 31,
	2016			2015
	(in thousands)
Deferred tax assets:
Net operating losses	$	59		$	1,614
Secured borrowings—government guaranteed loans	706			916
Other	104			264
Total gross deferred tax assets	869			2,794
Valuation allowance	(64		)	(1,507		)
	805			1,287
Deferred tax liabilities:
Loans receivable	(535		)	(618		)
Other	(10		)	(245		)
	(545		)	(863		)
Deferred tax asset, net	$	260		$	424

The net operating loss carryforwards at December 31, 2016 and 2015 were generated by TRSs and are available to offset future taxable income of these TRSs. The net operating loss carryforwards expire from 2027 to 2034.

The periods subject to examination for our federal and state income tax returns are 2012 through 2015. As of December 31, 2016 and 2015, no reserves for uncertain tax positions have been established and we do not anticipate any material changes in the amount of unrecognized tax benefits recorded to occur within the next 12 months.